Sparks foundation ‘unwinding’ benefit, legal obligations

Tom Webb says he is confident the “old” Sparks Health System foundation will have the funds to settle pension plan obligations and litigation settlements that are or may be part of the “unwinding” of operations not part of the November 2009 sales of Sparks Health System.

On Nov. 30, 2009, Naples, Fla.-based Health Management System acquired most of Fort Smith-based Sparks Health System in a $138 million dollar deal. Not included in the deal were certain unsettled legal actions against the hospital and assets of a Sparks charitable foundation. The foundation, a legal evolution of what was once the Holt-Krock organization that employed many of the physicians who worked at Sparks hospital.

Questions about the financial status of the Sparks Medical Foundation (legally known as the Fort Smith Regional Healthcare Foundation) were raised in the community following a $1.3 million jury verdict against the foundation. The verdict was handed down Monday (Sept. 26) in a case dealing with managerial interference between former Sparks CEO Ted Woodrell and Dr. Barry Uretsky (plaintiff), the former head of cardiology for Sparks Health System.

Webb, executive director of the foundation, said during a Thursday (Sept 29)  interview that since November 2009 the foundation has worked to collect accounts receivables, deal with litigation and unwind a defined benefit (pension) plan.

“We spent most of the first year collecting receivables and beginning the process of what we called ‘defined benefit plan termination,’” Webb said, adding that by the end of 2011 they hope to end the collection and benefit plan work.

An IRS form 990 filing notes the goal of the foundation: “From the sale date forward the organization operated to liquidate the A/R (accounts receivables), pay off the liabilities and in general run out the business. Once these objectives are accomplished, the organization will seek to combine with the other subsidiaries of the parent organization and distribute the remaining assets to the community in a charitable manner as determined by the board.”

Webb, along with an office manager and financial officer, are the only staffers for the foundation and The Degen Foundation, which was created by some former members of the Sparks Board of Trustees.

As of June 30, 2010, the Sparks Medical Foundation reported a fund balance of $519,204 on its form 990. The IRS filing showed the foundation to have fiscal year 2009 (July 1, 2008-June 30, 2009) revenue of $2.486 million, with the revenue falling to $1.098 million in fiscal year 2010.

The Degen Foundation contains restricted funds — investments escrowed for six years from the Nov. 30, 2009 sale date, according to Webb.

Webb would not disclose the amount of money in The Degen Foundation, other than to say it contained “several million dollars.” A form 990 filed Feb. 22, 2011, shows a fund balance of $7.824 million as of June 30, 2009, and a fund balance of $8.586 million as of June 30, 2010.

Degen investments in publicly traded securities (stocks, bonds, etc.) totaled $7.796 million in the fiscal year ended 2009 and $8.409 million for the fiscal year ended 2010, according to the IRS filing.

Webb said the desire of the two foundations is to soon begin funding programs and efforts that address their purpose. He said there are hopes that such funding will begin in 2012.

“I believe all of us feel very strongly that the funds that go into this foundation will be utilized to serve the needs of the underserved, the uninsured, the poor and the indigent in this community,” Webb said.

The form 990 for The Degen Foundation provides the following as the purpose for the organization: “(T)he foundation has developed a new mission & purpose. The exempt purpose includes (i) To promote and develop access to & delivery of healthcare services in western Arkansas and eastern Oklahoma; (ii) To improve the quality and availability of healthcare services; (iii) To facilitate and promote healthcare education, including scholarships; (iv) To aid, support and assist by donation or otherwise established charitable institutions qualified under section 501(C)3.”